Correlation Between Reliance Industries and Premier Polyfilm

Can any of the company-specific risk be diversified away by investing in both Reliance Industries and Premier Polyfilm at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Reliance Industries and Premier Polyfilm into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reliance Industries Limited and Premier Polyfilm Limited, you can compare the effects of market volatilities on Reliance Industries and Premier Polyfilm and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Reliance Industries with a short position of Premier Polyfilm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and Premier Polyfilm.

Diversification Opportunities for Reliance Industries and Premier Polyfilm

-0.79

Correlation Coefficient

Reliance Industries  Premier Polyfilm

Pay attention - limited upside

The 3 months correlation between Reliance and Premier is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Premier Polyfilm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Polyfilm and Reliance Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Reliance Industries Limited are associated (or correlated) with Premier Polyfilm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Polyfilm has no effect on the direction of Reliance Industries i.e., Reliance Industries and Premier Polyfilm go up and down completely randomly.

Pair Corralation between Reliance Industries and Premier Polyfilm

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 3.24 times more return on investment than Premier Polyfilm. However, Reliance Industries is 3.24 times more volatile than Premier Polyfilm Limited. It trades about 0.05 of its potential returns per unit of risk. Premier Polyfilm Limited is currently generating about 0.1 per unit of risk. If you would invest  110,875  in Reliance Industries Limited on October 4, 2024 and sell it today you would earn a total of  10,670  from holding Reliance Industries Limited or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.18%
Values	Daily Returns

Reliance Industries Limited  vs.  Premier Polyfilm Limited

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Premier Polyfilm

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industries and Premier Polyfilm

The main advantage of trading using opposite Reliance Industries and Premier Polyfilm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries position performs unexpectedly, Premier Polyfilm can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Premier Polyfilm will offset losses from the drop in Premier Polyfilm's long position.

The idea behind Reliance Industries Limited and Premier Polyfilm Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.